Multinationals abandon Iran despite EU efforts to rescue nuclear deal

ERBIL, Kurdistan Region – The European Commission has launched a process to protect the interests of EU companies investing in Iran as part of its commitment to the 2015 nuclear deal. However, a number of firms are already pulling out to protect their far larger US investments from sanctions.

The process, launched on May 18, aims to free European companies from complying with US sanctions and remove obstacles for European banks to trade with Iran.

On May 9, US President Donald Trump announced his intention to withdraw from the 2015 nuclear deal. Top European leaders say they will do their best to save the accord.

French President Emmanuel Macron called the withdrawal a mistake, saying he and other signatories to the deal will work for a broader agreement that covers both Iran’s nuclear activities and also its involvement in the Middle East.

UK Prime Minister Theresa May and German Chancellor Angela Merkel also say they will try to save the deal.

Immediately after Trump’s withdrawal, Iranian Foreign Minister Mohammad Javad Zarif began a diplomatic tour, including a meeting with several EU leaders. Zarif told Iran’s Tasnim news agency the meeting was positive and that he is hopeful the deal can be preserved without the US.

Friday’s statement displays a serious attempt by EU leaders to salvage the Iran nuclear deal.

However, multinational companies have not waited for EU leaders to find a way around US sanctions. Some have already begun cutting trade with Iran.

On May 16, French oil company Total announced its intension to end its project in Iran unless it is exempted from sanctions after the US pulled out of the nuclear deal.

Total gave hard economic realities regarding why the company has to stop trade with Iran. In a statement, Total said: “US shareholders represent more than 30 percent of Total’s shareholding … US banks are involved in more than 90 percent of Total’s financing operations.”

On Wednesday May 17, the world’s largest shipping container line Maersk announced it too has no choice but to adhere to the US sanctions. Soren Skou, chief executive of Maersk, explained: “With the sanctions the Americans are to impose, you can’t do business in Iran if you also have business in the US, and we have that on a large scale.”

Multinational airplane producers Airbus and Boeing have announced they cannot commit to the deal they signed with Iran in 2016 to deliver 200 aircraft.

The renewed US pressure on Iran is not only about Iran’s nuclear program. It is also about the political role Iran has played in the Middle East, especially in Iraq, Syria, Lebanon, and Yemen.

The first round of new US sanctions were implemented after pro-regime students occupied the US embassy in Tehran and took employees hostage. The US seized a total of $12 billion of Iran’s financial assets in the US and oversea banks.

In 1996, the US Congress imposed sanctions on foreign firms investing more than $20 million a year in Iran’s energy sector.

Later the US and other world powers through the UN Security Council imposed tighter sanctions on cutting Iran from international bank services and shipping companies.

The latest US sanctions will force multinational companies to halt trade with Iran despite the efforts of the EU leaders for two main reasons.

Firstly, the US will target multinational companies inside its market, so other countries cannot protect these companies. Companies will lose more and benefit less if they prefer Iran’s market over the US market, as the latter is much bigger.

Secondly, the US has huge influence in the global financial system. Since 2010, major international banks received huge penalties for breaching US sanctions. According to Reuters, between 2010 to 2017 major US, Canadian, French, German, and Russian banks were penalized by the US government. Bank of Moscow was fined $9.5 million in 2014, Germany’s Commerzbank $1.45 billion in 2015, and Britain’s Barclays $2.48 million in 2016. This is designed so that international banks cannot maintain trade with Iran even for short term risky benefits.

As multinational companies start to leave Iran’s market, EU leaders will either suggest a new deal or be forced to leave Iran to face US sanctions alone.

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